MUMBAI, Feb 4: The Special Court of Justice SN Variava on Wednesday set aside the Rs 912-crore arbitration award in the National Housing Bank-ANZ Grindlays Bank case. ANZ Grindlays won the massive Rs 912-crore award (including interest) against NHB in a securities scam-related case involving the crediting of cheques to Harshed Mehta's account. NHB has now won round two in the battle. Delivering the verdict, Justice Variava said there were "errors of law apparent" in the arbitration award. "They are all based on applying wrong principles of law. The award, in my view, must be set aside," he said. Under the Arbitration Act 1940, courts have the power to modify, remit and set aside arbitration awards.ANZ is all set to take the matter to the Supreme Court. The bank's lawyers - Dave & Girish & Co - however, said that they had not yet received a brief from their clients about the next course of action. ANZ Grindlays CEO (India) Mehli Mistri refused to comment. The bank will have to move court within 30 days ofthe announcement of the verdict (February 4, 1998).
RBI officials were cock-a-hoop over the verdict. Deputy governor Jagdish Capoor said: "The verdict has vindicated NHB's point. This also vindicates the Reserve Bank's stance. We understand that the other party is planning to move Supreme Court. We intend to put our views across to the Supreme Court. We are very happy with the verdict."
NHB chairman and managing director PP Vora said: "We are now entitled to get back the Rs 912 crore we paid to ANZ Grindlays Bank. They will have to return to us Rs 1,058 crore taking into account interest for the last 10 months at the rate of 18 per cent per annum."
However, ANZ Grindlays' lawyers said the money will have to be repaid to NHB only in the event of the Supreme Court turning down the appeal of the foreign bank. "This was made very clear while the verdict was delivered at the special court," said a senior lawyer at Dave & Girish & Co. The special court, in its ruling, has held ANZ Grindlays guilty ofconversion of NHB cheques worth Rs 506 crore to Harshad Mehta's account. It said that NHB is the true owner of the cheques issued under section 131 of the Negotiable Instruments Act, 1881.
The special court has, however, not commented on the fraud involved since the arbitrators had taken different views with regard to the fraud between NHB and Harshad Mehta as well as that between ANZ and Harshad Mehta. On March 29, 1997, the three-member arbitration panel, headed by former Supreme Court chief justice MH Kania, ruled in favour of ANZ Grindlays. The award was the result of a split 2:1 verdict.
The arbitration panel held that ANZ Grindlays was not guilty of wrongly crediting account payee cheques worth over Rs 506 crore in the account of scamster Mehta. These cheques were drawn on the Reserve Bank of India in early April, 1992, by the NHB. The arbitration proceedings, which were spread over more than 300 meetings in five years, saw more than Rs 15 crore being spent in litigation.
The NHB challenged thearbitration award saying that if ANZ's action was upheld, it would have grave implications for the Negotiable Instruments Act, 1881.
Besides, the prevailing payment system in the country - through account-payee cheque - would be severely affected.
ANZ Grindlays was represented by a team of high-profile counsel, including KK Venugopal and Iqbal Chagla. The others in the team were J Dwarkadas and D Kambata, assisted by Girish Dave and Mona Bhide from Dave & Girish & Co. The NHB was represented by K Parasaran and Aspi Chinoi assisted by Kumar Desai and GG Singh.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
